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Putting Money and Mouth Together

Ever heard of a Commitment Contract? No we are not talking about marriage. A commitment contract is one where you commit to doing something and sign a contract. If you don’t do what you committed to, the terms of the contract go into effect. The terms are set up in such a way that you could end up paying a penalty if you fail to honor the contract. In other words the incentives are aligned to elicit a specific behavior. The kicker is that you set up the contract and the penalty.

 

The system was developed by Yale economist Dean Karlan, Law Professor Ian Ayres and former student Jordan Goldberg and can be accessed at www.stickk.com. Based on research on incentives and motives, they developed a system to help people make and keep commitments. Theory says that regardless of what the goal is a person who commits is more likely to be successful than one who doesn’t. The stronger the commitment (public, with a penalty) the more likely the person is to be successful. So the website is set up in a very straightforward manner to help people make commitments (stop smoking, lose weight etc) and set up a payment system for non-compliance. Users can choose who they want the money to go to (say a favorite charity). More than 50,000 contracts have been executed through the site.

If you are interested, Ayres has a book (Carrots and Sticks: Unlock the Power of Incentives to get things done) that goes into more detail on the concept. You could commit to reading it.

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